Decision Recipes

Evaluating Underlying Symbol Implied Volatility Rank

Evaluating underlying symbol implied volatility rank allows you to choose whether a symbol’s IV rank is above or below a specific value before moving through the automation. Here is how to use it.
Evaluating Underlying Symbol Implied Volatility Rank
Steve Henry
May 14, 2021

The decision recipe for evaluating an underlying symbol’s implied volatility rank has three inputs:

  • Symbol
  • Above/below
  • Value

This decision recipe allows you to choose whether a symbol’s IV rank is above or below a specific value before moving through the automation.

Screenshot displaying the decision recipe for evaluating underlying symbol implied volatility rank

Enter a symbol and select “Next.” The second field prompts a dropdown menu to choose if the security’s IV rank is above or below the third field, where you manually input a value between 0 and 100. When you have finished creating the recipe select, “Save.”

Screenshot highlighting the save button following the decision recipe inputs

NOTE: You can also create a custom input, which allows you to input the field later to make the decision recipe dynamic across all automations.

The decision will be added to the list of criteria. You have the option to add more decisions to the recipe or return to the automation editor. When finished, select “Save” again to return to the automation editor.

Screenshot highlighting the save button to return to the automation editor

The automation editor will display your completed decision criteria for evaluating an underlying symbol’s implied volatility rank.

Screenshot highlighting the decision recipe within the automation editor

You can always select the decision inside the automation editor and make changes to the criteria.

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FAQs

Why is implied volatility import to consider for options trading?

Implied Volatility indicates a stock's propensity for large moves in price. The higher the implied volatility the greater the expectation that stock will move in larger increments.

Should I consider different types of trades based on different IV readings?

Yes, as IV can effect the other components of a trade strategy.

When I run my automation, can I see the actual IV reading and how it compares to my setting?

Yes, you can view this in the individual log.

How does implied volatility rank differ from implied volatility?

IV Rank is a metric that measures implied volatility relative to its range over the past year. The lowest IV rank over the past year gets a ranking of 0 and the highest a ranking of 100. On the contrary, current IV is normalized to the range to get the current IV rank. One is useful for understanding IV on more of a historical basis, the other for a current snapshot in time.

What the possible range on this number is it 0 - 100?

Yes.

Since it is Implied Volatility RANK, what it is ranked against?

It is ranked against other instances of the securities same IV at a specific period of time in the past.

Can this criteria be used as both an entry or an exit criteria?

Yes!

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